The chess piece, that is — as in two moves forward, and one to the side. Also, the knight is typically represented by a horse’s head, and while I picked a few nags, I didn’t do much to look like a horse’s back end this year.

To be honest, that’s a bit surprising. As the arbiter of stupid, there’s no denying that “lacking normal intelligence” — my favorite definition for “stupid” — sometimes applies more to me than to the investment I am featuring. But there’s not much to apologize for this year.

Stupid Investment of the Week highlights concerns and conditions that make specific securities, plans or products less than ideal for the average investor or consumer. It would be easy to have a perfect record by focusing on low-hanging fruit — companies near bankruptcy or the worst mutual funds in history — but that would be intellectually dishonest, since average investors avoid those things on their own.

Fool’s gold

The art in this exercise comes in finding a purported gem of an investment — where an honest case can be made for buying it — and determining that it’s cubic zirconium.

The concept of the “average investor” is also crucial to the process.

Savvy investors can profit from strategies and products that would make the average person nauseous. The bulk of my hate mail comes from stock jockeys, day traders and investors with advanced technical timing models or superior knowledge of a specific business or industry. They are far from average, except in how they react to seeing something they feel strongly about labeled as “stupid.”

The rest of my hate mail seems to come from dedicated (or stubborn) buy-and-holders, determined to ride out times when good companies are bad stocks. They may be proven right in the long run, which is why the Stupid Investment of the Week column always notes that it’s not an automatic signal to sell.

That said, studies show that average investors bail out when losses move beyond 20%. If a security nosedives and investors flee, any subsequent rebound is no salve, because the ordinary investor only got burned. That’s why I typically consider it a good call if a stock or fund I’ve singled out loses 20% to 25% after I write about it, without making any significant gains.

Of course, some investments are stupid at all times and in all market conditions, like these from the 2011 Stupid Investment portfolio: Matured unredeemed U.S. Savings Bonds; the Gerber Grow-Up Plan and Gerber Life College Savings Plan, and life settlements See column on savings bonds.

Best of the worst

To be sure, there were more than just those timeless “winners” over the last 12 months.

Bitcoin, the global electronic currency, still strikes me as a cool idea that may have a long-term future, but it was the classic bubble for investors who learned about it as it shot from being worth a nickel last year to $30 in June; it had settled down to $10 when I wrote about it in August, which had average investors wondering if they get in at what they saw as the ground floor. Instead, Bitcoin had a lot lower to go, as it currently is worth less than $4. Read about Bitcoin

Brazil Gold Corp. BRZG
was touted in a bought-and-paid for e-mail from a newsletter editor in February, and peaked as investors figured all gold stocks would glitter like the metal itself. The stock has lost roughly 93% since. Read about Brazil Gold.

Likewise, micro-cap gold stock Tuffnell Ltd.TUFF
was hyped in a promotional piece distributed by the “Elite Stock Report” newsletter, and it too has lost more than 90% of its value since. See column on Tuffnell.

Duff & Phelps Global Utility DPG, +0.87%
did exactly as suggested off of its initial public offering in late July, falling by more than 25% before bouncing back; though it still stands off about 15% from when it came out. Read about DPG.

Lennar Corp. LEN, +1.29%
dropped more than 35% from when I said in March that it would fall much farther before it rebounded; that said, it also bounced back a lot faster than I expected, to where it has almost completed the round trip. See report on Lennar.

I wrote about Goodyear Tire & Rubber Co.GT, +0.33%
after its share price was inflated by a positive earnings surprise, suggesting that the gain would be short-lived, after which the stock was due for a drop. I had the story right, but the timing wrong; Goodyear actually gained more than 30% in the three months after I wrote about it, only to give it all back and drop by nearly 35% before rallying again to where it’s now only slightly worse than when I wrote about it. See Goodyear column.

Fair trade

I don’t look back on these picks with regret, but I do wish I had been a bit more accurate on Principal Financial Group
PFG, -0.03%
I seem to have picked it in August right around its support level, and while it tested new lows, it never established them; the stock has gained more than 10% since, not enough to wow anyone but certainly not the “rocky ride” I called for. Read about Principal.

In hearing from NIA “supporters,” I have come to recognize that many of them are day trading the group’s picks. Had they gotten out when I wrote about OPTT, they would have missed a 40% gain, although the stock has since given that all back and is down more than 20% from when I featured it.

My worst pick of the year was Altria Group
MO, +1.14%
which I described in September as a “good company, bad stock,” despite a dividend of nearly 6%.

Not only did the company avoid the downturn I saw coming, it has gained more than 10% and extended that long dividend history. While I’m still not in love with what I see in the financials, it’s the kind of stock an average investor, particularly one who is pining for yield, should not be scared out of. See column on Altria.

Here’s hoping the market adopts a forward-then-sideways attack angle for 2012, so picking investments will be a whole lot easier for average investors. No matter the market conditions, I’ll try to do better next year.

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